Wednesday, October 22, 2008

Investments that will survive the banking crisis

How could you protect yourself against bank nationalization without being the sucker who gets caught holding paper currency? First, invest in camping equipment, clothes, boots, survival supplies, food, water purifiers, vitamins, a good set of tools, some general skills, and some gold coins. It is a good idea to have this stuff regardless of what happens. Leftover money can go into shares of profitable companies that make essentials. Make sure they won’t have to roll over any debts in the near future. For example, Google is debt-free, profitable and essential to a barter economy. Pharmaceuticals should be a good play too. At least you know there is a bottom to such stocks, but don't buy them yet. Inflation and credit crises are generally bad for stocks, and the full extent of this crisis is not priced in yet. Stocks will go down again but they will come back as long as the companies have pricing power. Even the Zimbabwe stock market is up 257% today, so you poor Americans can invest there as a hedge against inflation! Real estate will be good for the longer term, if you can afford it. You might have to buy it without a loan, but it would be nice to gradually pay a loan back in worthless dollars.

Of course, this assumes that civilization and its legal institutions will survive. Landowners, farmers, mechanics and other tradespeople will survive the crisis and pull us through. At least I hope there will be enough oilmen and mechanics to maintain the machines which will maintain the farmers, because billions will starve if we have to rely on 19th century farming techniques. In that case, only the survivalists would survive. Which brings me to a guaranteed can't-lose investment idea for hardcore paranoids. What's portable, can be turned into food, and can function as an insurance policy on any gold coins or real estate you might have? What will surge in value if the entire financial and legal system collapses, but can still be sold without much loss if we're at the bottom right now? What was the one precious commodity that Lord Humongous, Master of the Wasteland kept in a special little box that he carried with him at all times?


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